Transcript: Why Is Gold Rising In 2014?

After plunging by some 25% last year, the price of gold has turned around in 2014 and is handily beating what seems to be a nervous stock market. Money Talk host Owain Bennallack asks his Foolish colleagues Nate Weisshaar and Mark Rogers why the yellow metal has got its mojo back, and does that make gold miners a buy? They also weigh in on Davos, kick about Labour’s proposals to partially break up the banks, and suggest three shares worthy of further investigation.

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After plunging by some 25% last year, the price of gold has turned around in 2014 and is handily beating what seems to be a nervous stock market. Money Talk host Owain Bennallack asks his Foolish colleagues Nate Weisshaar and Mark Rogers why the yellow metal has got its mojo back, and does that make gold miners a buy? They also weigh in on Davos, kick about Labour’s proposals to partially break up the banks, and suggest three shares worthy of further investigation.

Owain Bennallack: Hello, and welcome to Money Talk, the investing roundtable from The Motley Fool. I’m Owain Bennallack, and I didn’t make it to Davos in Switzerland this year, to discuss important affairs at the World Economic Forum, with the world’s big, brightest thinkers.

But, I have tempted two of my Motley Fool colleagues into the podcast studio with empty threats of blackmail and a promise of doughnuts that’s equally empty as well. Mark and Nate, welcome to the Money Talk studio.

Mark Rogers: Hey, Owain.

Nate Weisshaar: Less happy to be here, now that I’ve found out the doughnuts was an empty promise.

Rogers: No Greggsnuts, either.

Bennallack: No. Well, I thought we’d decided Greggsnuts were no longer on sale.

Rogers: You know, I had one and I microwaved it. Delicious.

Bennallack: I’m really shocked, though, because you said they weren’t selling them anymore. Does that mean you found one at the back of your cupboard, that you then microwaved?

Rogers: My stash, yes.

Weisshaar: He got it on clearance.

Rogers: That’s why I had to microwave it; it was so stale.

Bennallack: OK, well it’s almost the end of January. It will soon be February — I think when this goes out, in fact, it will be February — so how did this happen? Soon we’re going to be sitting here, looking back at 2014. We’ll be going, “Wow, that was a good year for Dewhurst shares,” maybe, Mark. Maybe not! Then it will be Christmas again …

Rogers: It’s been really eventful, with the selloff in the markets, with Davos, etcetera. There’s plenty to talk about, this month.

Weisshaar: Yes, the year does tend to fly by faster and faster for me, so I must be getting old. Mark has not yet achieved that goal, but …

Rogers: Imagine how Owain feels!

Bennallack: I did think, actually, Mark answered that question far too brightly. He doesn’t know what it’s like to look at the calendar and one minute it says February, and then it says November. Or maybe he does, if he doesn’t take his calendar … if he pulls the things off backwards, I was going to say. My mind’s going!

Anyway, existential ponderings to one side, we will have some interesting topics to discuss this week. In fact, I think this podcast is as close as we’re ever going to get to Money Talk, the Conspiracy Theory Edition. We’re not going to actually talk about conspiracy theories, but we are going to talk about gold and, on the Internet especially, that often amounts to about the same thing.

After that, assuming we don’t get taken out by government hit-men — or whatever happens when you discuss gold — we’ll turn our attention to the big themes raised by world leaders, top economists, and Bono and Matt Damon at Davos, and we’ll ask if any of it matters to humble investors like us.

Mark is giving me that look that says that I’ve said “Matt Damon” wrongly. I don’t read the same celebrity magazines as Mark.

Rogers: I’m his biggest fan, obviously!

Bennallack: Then we’ll go on to banks; Labour leader Ed Miliband, he wants more competition and he says he’s going to break up the banks in order to get it. What do we think of that, and what do we think it means for their share price?

Finally, if we’re all still standing and we’re not all craving doughnuts, we’ll share our usual three ideas about shares; what we’re watching, and why. All set?

Rogers: Let’s go!

Weisshaar: Let’s do it.

Bennallack: Okay, let’s start with gold. For the first time in a long time, as Mark Carney likes to say — I’m going to say it every podcast this year — gold investors are smirking at those of us who prefer to own shares. Mark, how has gold done in 2014 to date, versus the equity market, and why?

Rogers: Well, it’s only been a month, but I guess you could say it’s been a relatively disappointing January for equity investors. The FTSE 100 is down a few per cent, whereas gold had a 5% gain in January which, for a one month performance, is pretty hefty. It’s back up to $1,260 in dollar terms, now, which is certainly an improvement on the 28% loss it endured last year.

But even better than that, the gold miners — which are seen as a more leveraged play on the gold price — have done even better than that. In the U.S., Randgold and GoldCorp, two of the big miners over there, are both up 12% just in January.

Whether it’s just a part of relief from those losses from last year, but at the same time when you look at what’s going on in the world — with China and Japan, geopolitical tension, and the selloff we’ve seen in the markets — there’s arguably some return to the “safe haven” aspect of gold in the last month.

Bennallack: Yes, I suppose there could be. Also, it’s a bit like the old Dogs of the Dow theory, where you just buy whatever was the most rubbish last year, on the hunch that they’ll bounce back the next.

The price of gold was down a quarter, pretty much, in 2013 and the big gold miner ETFs halved, so a lot of people would say that there was nowhere else for it to go, but up. Obviously, the gold bugs would say as soon as Goldman Sachs and the Federal Reserve had mercy on the hard-pressed shorts — or whatever stupid phrases they use …

Nate, do you think this is just a case of things not being able to get much worse? Do you think that the conspiracy’s been called off? What’s going on?

Weisshaar: I think, partially, it is that things couldn’t get much worse. As long as you are a gold miner with a decent balance sheet, things couldn’t get much worse. For those miners that don’t have good balance sheets, they could get worse, and probably will, and we’re seeing some consolidation in the industry because of that.

But, I think it’s a little too early to call a victory for gold. It’s only been a month. We’ve seen something similar to this gold price movement in the past; in 1999, actually, we saw a very similar decline and we know what has happened to gold since then. Bounce, rebound, new fears; I don’t know. I think it’s a little too early to call that right now.

Bennallack: It is interesting to me, gold, more than it used to be when I was younger — Mark — because, after you watch it for a while you do realise it just has a mind of its own. In that sense, it’s potentially an attractive thing to own in your portfolio, if you believe that there will always be some appeal for gold.

Weisshaar: Well, it is a very emotional investment.

Bennallack: But it’s an uncorrelated investment, on the whole. I saw a chart the other day, actually showing that it was correlated to interest rates — i.e., when interest rates go down, gold price goes up, because obviously you don’t have to pay to carry it.

Weisshaar: You lose the opportunity cost if rates are super-low.

Bennallack: We don’t tend to talk much about gold miners in The Motley Fool office; certainly, compared to those Internet bulletin board posters — who don’t even go to an office, I think, because they’re always in their bunkers, sticking up tin foil around the walls and counting their Krugerrands or whatever.

But if we were going to invest now, because we think maybe there’s a bit of an opportunity — the price has come down — would either of you, in fact, look at a gold miner, and if so which one?

Rogers: I’m going to defer to Nate, just for now!

Weisshaar: I’m not going to rule them out. I think a well-run gold miner has as good a potential as any company, really. But finding a well-run gold miner, just like finding a miner that allocates capital well, has historically been a tricky proposition.

I tend to like the ones that have strong balance sheets and operate in relatively low cost. Obviously, that can come along with some political risk.

Bennallack: Yes, because generally where the costs are still low, that means you’re in Africa or similar.

Weisshaar: Yes, so you’ve got to be looking for someone who’s operating in a friendly environment. Mexico has historically been pretty friendly, although they just raised the tax on miners.

I think, just like my go-to with all the miner discussion, if I was interested I’d start looking at one of the big guys, because they’re geographically diversified and they’re not relying on a single mine to put them through the roof. But of course, that also limits your upside.

Rogers: They tend to be a very difficult business — mining for gold — similar to other commodity-type businesses. But I think if you insist on looking at the sector for long-term investment there are two things, broadly, that I think are important to consider.

First of all, looking for the low-cost producers, like Nate says; that’s really important. That means that there’s that extra possibility that they’ll keep their head above water when times do get tough.

Secondly, I think things like P/E ratios and current levels of earnings have to go out the window when you’re looking at these companies as a private investor. You have to really think of it in terms of the assets that these companies have, and the likelihood and ease by which they’ll pull the stuff out of the ground.

Bennallack: I thought you were going to say, “All my shares are gold miners.”

Rogers: None of my shares are gold miners.

Bennallack: Yes, I think that’s all good advice. I’d also look at the balance sheet in terms of debt because, incredibly, some of them have debt despite going through a decade where their commodity went up six-fold — because, of course, it costs a lot of money to mine gold.

Weisshaar: That’s the eternal cycle for miners; it costs a lot of money to dig the hole, the resource that you’re pulling out is finite, so you’ve got to go dig another hole. If you want to continue growing, and you don’t want to just rely on rising gold prices, then it’s going to cost more money.

Rogers: I think private investors, as well, should be very careful. If you pull up a five-year price chart and you see, “Well, look how far this miner has fallen from where it was” — especially in the smaller company space — you have to consider things like dilution that might have occurred over that time period and, as well as that, the very real possibility that gold doesn’t end up back towards $2,000, which the investment thesis would have been in 2011.

Bennallack: Yes, it’s interesting when it was near to $2,000, a lot of these miners just didn’t follow it up anyway, so equity investors obviously weren’t so convinced as gold buyers, I guess.

Right, one place where there was plenty of bling, if not gold, was in Davos, Switzerland this month, at the Annual World Economic Forum’s meeting of the great and the good. Somehow, my invitation got lost in the post. Nate, you have been doing a bit of research, though, on the Internet, from people who were lucky enough to get there. What were the interesting talking points?

Weisshaar: There were three or four big ones. Obviously, unemployment, income inequality — those two, I think are very closely tied. The environment was another talking point, and then cyber security as well as privacy, which are also tied together.

Bennallack: Yes, I guess if you’re a millionaire captain of industry or banker, you’re very interested in income inequality — i.e., maintaining your income inequality — and also your privacy and security, to make sure you don’t get robbed!

Despite those woes on their shoulders, that they were carrying, I thought everyone seemed a lot happier this year. When I was watching the CNBC interviews, a few years ago everyone looked really miserable, standing out in the cold, talking about the end of the world. But I guess these guys have a bit of a spring in their step. They feel they’ve saved the world.

Weisshaar: Well, a few years ago, their stock options were a lot less valuable than they are today. They also had a few good news points; number one being the resolution between Iran and the U.S. and the rest of the world. That’s a big piece of good development, as far as the well-being of the world; any time you can reduce tensions between potential nuclear powers!

We also heard some positive noise out of Unilever CEO Paul Polman. He said that he’s starting to see corporations really get interested in investing in environmental wellness. They’ve come to recognise that it is in their best interests to make sure that the world is still here, so that they can sell stuff to people.

Those were two pretty good bits of news, as well as obviously people being richer than they were, three years ago.

Bennallack: Yes, I heard that when Ed Miliband announced his 50p — or I think Ed Balls did the announcement, his assassin — the 50p on the pound, highest rate of tax, that Labour intends to bring back, should it be elected; that all over the slopes of Davos, mobile phones started ringing, because all these people were being called by their private wealth managers to shelter a bit of their assets, ASAP.

Weisshaar: There’s that wealth inequality thing again.

Bennallack: Yes.

Mark, did Dewhurst or Greggs send a delegate to Davos?

Rogers: I think they were too busy at LiftCon and PastyEx this year. There must have been a clash of conflict on the calendar, I think.

Bennallack: Unfortunate.

Rogers: But it’s funny, because Warren Buffett doesn’t turn up either, so I’m criminally underrepresented. I have nobody lobbying my interests at Davos, this year or any other year.

Bennallack: Maybe he’s jealous, because he’s got his own Buffett stock; Berkshire stock? Berkstock? What’s it called, Mark? What do they call it?

Rogers: The annual meeting?

Bennallack: I thought they had a catchy phrase, like “Berkstock.”

Rogers: The Woodstock of Capitalism.

Bennallack: Oh, okay. They haven’t called it … actually, “Berkstock” is probably a bit insulting.

So, you’re not in favour of your CEOs going off to Davos?

Rogers: No. I don’t mean to go off on a rant here, but if I was, for instance, an ambassador at M&S, and I saw Marc Bolland, CEO, turning up in his flash suit at Davos just weeks after the very poor Christmas trading that they put out, I’d be asking, “Why is my CEO here, rubbing shoulders with politicians, and not focussing on things that are going to actually make me money,” which is sorting out this business — especially the clothing division that they have.

Bennallack: It’s tricky, though, isn’t it? Firstly, he may have been selling some cheap suits from his room.

Rogers: Possibly.

Bennallack: But secondly, I guess these guys, at the highest level, their job isn’t to put things on the shelves. It’s to get a sense of where the world’s going.

Rogers: It’s a different world from looking at something like Dewhurst, for instance. It’s a simpler world. They’re focused on their business, and this kind of thing doesn’t come up, and they don’t really have interests to lobby, unless they have buttons to sell.

Bennallack: Yes, sure.

Well, one thing that did preoccupy the Davos attendees a lot less this year, as I’ve said, was world in crisis, and particularly the state of the banking system. Perhaps it’s the calm before the storm — I thought I’d get that in before you do, Nate — but on the whole, the fear of systemic banking failure seems to have receded, at least a little bit.

Mark, Ed Miliband — who’s come up again in this podcast — has decided that if the world economy isn’t going to screw up our banks, then he’s the man to do it. That’s the gist of it, isn’t it?

Rogers: Have you been reading City A.M. again, by any chance? It’s not just been the right-wing press or anything else that’s come up with criticism to this. It’s been fairly broad — and as well as that, to the 50p rate of tax. It received, shall we say, a very lukewarm response in most circles.

Rogers: Yes, in the banking sector, especially. The proposal is that, out of the big five high street banks — that’s HSBC, Barclays, RBS, Santander, and Lloyds — the feeling is that they should be forced to reduce some of the power that they have over the high street banking industry.

Those five hold about 85% of the current accounts in the U.K., which is an awful lot, and the feeling is that they’ve become too powerful, complacent, and the system is broken, apparently. So, there’s this talk of them being forced to sell off branches, and to cap their market share, effectively.

Bennallack: I could wax lyrical, a bit more, about what all this means for banking, if not capitalism. In fact, I probably will in a minute but, Nate, let’s think about the shares for a moment. Does this mean automatically bad news for the share prices of British banks, assuming Labour gets elected?

Weisshaar: I wouldn’t say automatically. There’s a long distance between your campaign speeches and actually putting this type of legislation into place.

Obviously, bankers are maligned across the board, essentially, right now. This would not help that, but I don’t know that at this point we can say “Miliband coming into power means that Lloyds is half as valuable as it was,” or anything that concrete.

We’re already seeing efforts to increase competition. Lloyds is spinning out TSB, so there will be another bank on the market.

Bennallack: I’ll tell you what my beef is with this whole business. You and I have spoken a lot about how high street banking should be effectively a utility business. I stand before no one, shaking my fist at the outrageous salaries that some investment bankers get paid, or even some of the top bankers.

But in general, the high street business isn’t the kind of business that is raking in big bucks and people should be particularly angry about. So I think, if you look at all the legislation that’s come in, the way that banks have been stopped from doing dodgy things that use to effectively allow the high street to be a profit centre — like payment protection insurance or whatnot — all those income sources have been rightly driven out.

We still all have free banking. I’ve never paid a penny for my banking, ever, so I would argue that if you want banks to be utilities, you want the margins to be very small, effectively. How are you going to create new banks with 300 branches? They’re just not going to be competitive, unless the government effectively underwrites them and gives them cheap money — which, we did try that in, say, the Soviet Union, or perhaps it’s being tried now in China.

To me, it just seems he’s got his priorities the wrong way round. If he decides there’s a reason why that current account market is bad, then I think he needs to tackle the specific reasons. Prior to the credit crisis, there was vast amounts of competition for savings and deposits; some would say that was a problem, that so many banks came in and offered unsustainable interest rates.

I think they’re looking for two different things, here. They’re looking for banks to become low-margin utilities, and yet they expect small, nimble entrants to be able to come in and get some of that business.

Weisshaar: It’s a tough balance between what you want the banking industry to be and, if you are a hard-core capitalist …

Bennallack: But just my general point; if they were to take 300 banks off, and create a new bank, if that bank is going to have all the overheads of, say Lloyds, but it’s going to have 300 branches, is it going to be more competitive than Lloyds? How can it be?

Weisshaar: It can’t be more competitive, because they’re essentially operating in a commodities business. To your point, I’m not sure; simply breaking up the banks is not going to increase competition. However, there are various hurdles that can be reduced to allow easier entrance from competitors.

That may or may not end up in Lloyds losing market share; Lloyds has done a great job at building up its brand.

Bennallack: You come from the land of 1,000 banks.

Weisshaar: It’s 6,000 banks.

Bennallack: … 6,000 banks, so that sort of speaks against my theory a little bit, in that obviously there’s room for 5,995 other banks, beyond the big ones. What do those guys offer? Is it just that they have local managers, or is it that it’s just inertia from their customers?

Weisshaar: There’s a bit of both. It’s obviously very rare that you will see people move their savings accounts, so there is inertia from customers, but there’s also a personal feel. A lot of people will go complain about customer service at HSBC or Lloyds, and there’s little feeling that HSBC or Lloyds actually has to listen to that, because there are five options and nobody’s very good at any of this.

Bennallack: Is banking free in the U.S., or do you pay for it?

Weisshaar: On the whole, banking is free. The fees are starting to creep in because of the new regulatory requirements.

Bennallack: Because again — I understand that I am sounding like the arch-capitalist — but Metro Bank, for instance, is offering customers higher levels of service; and it definitely is, but it’s not the most competitive for mortgages or whatnot. The choice is there, if people want to vote with their feet, I would say.

Weisshaar: Again, it’s very much the case, but Metro Bank also has a minute fraction of the branches that Lloyds has, so there is a feel of the Tesco aspect; if you don’t have options of where to shop, you’re just going to go to the biggest, most prevalent one.

Rogers: What actions do you guys think need to be taken, to end up in a situation — in terms of the mortgage market in this country — where it looks more like the U.S. market, and in other countries, where it is a standard to get very long, fixed, attractive rate mortgages? What direction needs to be taken, and do these actions that Labour are talking about, speak to moving in that direction or moving away from it?

Weisshaar: You sound like you’re speaking from a personal aspect.

Rogers: It’s almost as if I’m looking to borrow some money, myself …

Bennallack: It is interesting. I was saying to Nate that banks have tried to introduce longer-term fixed in this country, and they have argued that there’s been no demand for it. You were pointing out that, in the U.S. …

Weisshaar: There’s no prepayment penalty on those loans.

Bennallack: That’s incredible.

Weisshaar: … which is the big difference between what has been offered here in the U.K., versus what’s been offered in the U.S. and, let’s say, France or the Netherlands. What you see is, people don’t want to get locked into a rate for 30 years — wisely so. It doesn’t necessarily pay, if you’re going to pay a big penalty if you move, or if you find rates falling. Right now, that’s probably not a big …

Bennallack: I have to say, I’m just amazed by the U.S., as a market. I mean, you can basically go and buy a house, you can take out an interest rate that’s very low, and locked for 30 years. If it falls lower, you can just re-mortgage — refinance, as you guys say — so there’s no downside. And, in a lot of states, if your house ends up worth less than you bought it for, you just post them back the key! How could that possibly not cause enormous bubbles?

Weisshaar: We saw one of those.

Bennallack: Exactly. It just seems madness. I think we’d better draw a line under this, because obviously some bank will go bust in a month, and we’ll be back to banks again.

Let’s get round the bend and into the home straight. It’s time for our concluding segment, which is where each of us proposes an interesting-looking share that we’re currently following. I’m going to ban banks.

Mark, I don’t think you’ve probably been looking at banks anyway. What has got your attention, these days?

Rogers: You know I try and be as topical as I can with these. It’s Chinese New Year — or at least I think it will be, by the time that this podcast airs — and it’s the Year of the Horse, I’m told.

Bennallack: Nay!

Rogers: Neigh.

Bennallack: Do you see what I did there?

Rogers: Owain, you’re terrible.

Bennallack: Or is that year of the donkey?

Rogers: Yes. I couldn’t find a horse-related company. I thought about maybe Dekra or something, but Owain, you have enough horse manure to go around.

Bennallack: Who? Who did you think of, sorry?

Rogers:Dekra.

Bennallack: Gosh, that’s obscure.

Rogers: Yes. I’m not going to go obscure. I’m going to go with a company that …

Bennallack: Stick to the facts.

Rogers: … that does a lot of business in China, and that’s luxury fashion retailer, Burberry. Now, the shares have sold off quite a bit recently because of fears of China slowing down, emerging markets slowing. And, as well as that, because the very well-respected CEO, Angela Ahrendts, is leaving for Apple.

With those risks in mind, I think the new CEO, Christopher Bailey, looks like a fine replacement. On top of that, I think longer-term, demographically, China looks like a superb place for them to be doing the majority of their business. When you look at the demographics there, the number of households that are going to be earning a lot more money, as potential customers for Burberry in the future, I very much like where the price is here, and I think patient investors could well be rewarded.

Weisshaar: Obviously, Mark, the big question is going to be Christopher Bailey. Angela Ahrendts has done an amazing job reinvigorating the Burberry brand. She did it with the help of Mr Bailey, but it’s a big step to go from head of design to running the company itself.

Rogers: Yes, Mr Bailey has effectively had a very large hand in the creative direction of the company since about 2001. It’s a very long time to be relatively senior level at any company. As well as that, he’s been controlling the direction which, at a fashion company like Burberry, is incredibly important.

I think the transition period, which we’ve seen, it’s not been a surprise. Ms Ahrendts has not disappeared overnight. This is obviously something they’ve been able to plan for. Succession-wise, I think Mr Bailey has shown, so far at least, that he’s continued along the initiatives that his predecessor has promoted, and things look pretty bright, I think, with Mr Bailey in charge.

Rogers: Yes, and I have some snake oil to sell you, if you’re interested, Owain.

Bennallack: See me round the back, afterwards …

Weisshaar: Getting back to my company, I’m bringing Ashmore Asset Management. They focus on emerging market debt, which has really helped them recently. But obviously, with the selloff in emerging markets, the fear of the end of QE impacting demand for emerging market bonds, as well as interest rates around the world, they’ve been hit pretty hard.

I think it’s a well-run asset management company, and the long-term trends for emerging markets, I think, speak to a successful opportunity for patient investors.

Bennallack: I guess they were also just hit by currencies, and that as currencies have gone down — emerging market currencies — that’s not great for their assets under management.

Weisshaar: Usually when you are tied up in emerging markets, the currency will come into play, especially given their specialty in domestically-denominated debt, which was what people really were going after.

Bennallack: That’s going to bring me to the next question. I’m going to ask two quick questions, if I count that as one question. The other one is — and I don’t mean this in a combative sense, because I obviously buy asset managers myself sometimes, and I have in fact looked at Ashmore — but always when you buy a company like this, you’re taking on extra risks, really.

Because you could go to — I think iShares does a variety of emerging market bonds; ETFs, you can get government bonds, or high quality emerging market corporates.

Given that Ashmore is going to be driven, to a large extent, by how those gyrate around, isn’t it more sensible to just get direct exposure, if you want exposure to that asset class, via the asset class rather than taking on the management risk, or just the geared effect of an asset manager on top of that?

Weisshaar: That’s one approach, but I think that the business model of an asset manager is highly attractive. It’s a low-asset business, and for every extra million pounds they bring in of client money to manage, the added costs are minimal. So, yes, if emerging markets go out of favour — or, more to your point, if ETFs become of bigger use to institutional investors — Ashmore may not be the right way to play it.

But I think that the upside potential you get is similar to a miner. It’s a bit more levered, so if you’ve found a good manager that you think can continue to attract funds and provide good governance, then I think the upside potential for a company like Ashmore is substantially stronger than just buying the ETF.

Bennallack: Okay, we get to me now. We’ve already done gold miners and banks, so I thought we’d go to the third member of the axis of evil in the stock market these days, and that’s emerging markets. In particular, I thought I would discuss Hansa Trust, which is — actually, I don’t think it is actually down with the turbulence of the last couple of weeks in emerging markets — but it was down with the turbulence of the Brazilian market last year.

It’s effectively a family vehicle that invests heavily in emerging markets, and is particularly exposed to Brazil, which has been one of the most … “volatile” is probably the polite word; “man falling out of a 50th window” would be the colourful metaphor.

But you get something for that. For a start, you’re buying it a lot cheaper than it was a few years ago. You’re getting a discount on the assets of 25%, and that discount is arguably, itself, discounted further because some of those net assets are actually at a discount — so you’re getting a discount on a discount.

I’m looking at Nate and thinking, “Stop me if you’ve heard this one before,” because this state of affairs has actually been like this for a couple of years now, but then emerging markets have been out of favour for a couple of years.

I don’t think you can buy this and immediately think that you’re going to see any immediate upside, but it could be a good time to get a nice bunch of assets, cheap.

Rogers: Owain, you know how long I spend preparing for these podcasts, and researching, asking these questions.

Bennallack: It doesn’t look like you slept last night.

Rogers: No, exactly. I’ve been up all night, looking at Hansa Trust, and I happened to notice — by typing it into Google and looking at the TrustNet page — that 35% of the fund is a company called Ocean Wilsons. Could you tell me whether or not you’d be happy to have that kind of exposure to one single company in this trust?

Bennallack: Well, it’s absolutely a pertinent fact, because normally you don’t go and buy a diversified investment trust and expect to see a third of its holdings in one pretty small company. Ocean Wilsons is a company involved in shipping in Brazil. It’s building various ports and whatnot, so it’s not the world’s safest company. It’s not selling tea in China.

I think you do have to like the company. It’s there because of historical reasons; the whole family was involved with Ocean Wilsons. I think they share — certainly, the boards share people, I’m pretty sure.

Ocean Wilsons, itself, I think it looks reasonably attractive at this level, so I think your diligent research paid off! It’s definitely worth thinking about. The next largest investment after that is about 5%, in terms of individual companies, so it clearly is going to play a big part in driving your returns.

Rogers: That’s interesting.

Bennallack: You like Ocean Wilsons, don’t you, Nate?

Weisshaar: I do. I think it’s in an interesting place. While Brazil is very under pressure right now, Ocean Wilsons has a nice job of running tugboats and building ships to help support the offshore drilling, so it’s kind of a picks-and-shovels play on the offshore exploration for the pre-salt oil finds.

Bennallack: There you have it. There’s Hansa, Burberry, and Ashmore. If any of those do very well then I won’t mention them again, unless it’s Hansa Trust, in which case tune in in a year, to see how it got on.

I think that brings us to the end of the podcast.

Rogers: Yes.

Weisshaar: I think that’s about all.

Bennallack: I’m going off to buy some doughnuts.

Rogers: Superb.

Bennallack: I don’t know where I’m going to eat them.

Rogers: And not give us any.

Bennallack: I’ve got to keep you coming with the promise of them in the future.

See you guys, thanks for coming in.

Rogers: Bye.

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